The Death of Cycle to Work?

[Norm]

In Norm's (no offence) by the book world, it would be done properly, as he has stated, resulting in a good discount over the year for the purchaser. But this clampdown so far looks like it will mean that we (who have our schemes run by cyclescheme or whoever) may well end up paying more in the end than using our credit cards in the first place.

None taken... mainly because I fell for the same trap when setting up a scheme last October. Well, trap might be the wrong word, but I hope you know what I mean.

Everyone was doing it wrong, possibly misguided by examples in the DfT's notes, possibly because they (we ) took accepted custom and practice to be correct. I'm guessing (charitably) that the DfT and HMC&E might have been discussing this mistake, resulting in the new guidelines, but it's going to leave people out of pocket.

Because the rental plans are non-revocable, those currently in a scheme paying rentals and later subject to paying market price may be screwed.

Another issue is, as GrasB mentions, that the question mark over the "worth" of the bike will now need to be factored in to the calculations for the monthly payments. Because the sale price cannot be guaranteed at the start of the rental period, there will be some concerns from both the employers and the employees about that uncertainty. My guess would be for the employer to make an assumption that a 12 month old bike would be worth 60% of the new price (or 50% or 40%, just pick a number!) and use that for the rentals. At the end of the period, make sure the actual valuation is close to that (get a friendly LBS to quote).

On the actual valuation, I would be surprised if HMC&E ever went down into the detail - I don't think that anyone has personal experience of an HMC&E check, so this whole thread could be just scare-mongering anyway.

Further, one of the main things which got my scheme approved was that the payback time for the bikes was relatively short, so the employers were not out of pocket for long. Implementing an amended scheme would mean, in my example, that the employer forked out £1k for the bike, but would only reduce their salary costs by £400 over the 12 months. Even with the VAT and NI savings, the employer would be out of pocket until the end of the rental period. Some employers might not like that idea.

The main thing, IMO, is that people getting new bikes under the scheme need to make sure that the scheme rules and payments reflects life under the new guidelines.

 

[Downward]

Cyclescheme won't charge anymore than 5% as it makes no good business sense. All the people that use it usually go back for a 2nd bike. If they put the price up that they charge you to take ownership they will lose a lot of this repeat business. On another note Norm - Bit concerned now, We are going to have to go out to OJEU for this as we spend £35k ish per annum with Cyclescheme so are looking for a company to administer the scheme but surely everyone ( I am thinking Evans or Halfords although this really limits peoples choices) is out to make a profit ?

 

[fossyant]

I've just come out of my first year with cyclescheme...

Can't complain - I was a test case for work, then the advisory 5% was asked for last week to settle..... flipping good job....

I was glad my 12 months was at an end - I won't be entering into another... too much risk at the moment...

I use my bike a fair bit for business, so the real saving was not much over 12 months (if anything), but I was actually able to get a 'work' bike via the boss......

 

[Norm]

Cyclescheme won't charge anymore than 5% as it makes no good business sense.

It is possible that cyclescheme could prove beneficial, because they could charge you the 5% which has become generally accepted without the employee incurring a tax liability, because they are an independent third party.

However, they remain a commercial operation so I remain cynical until we've seen some numbers coming in.

...but surely everyone ( I am thinking Evans or Halfords although this really limits peoples choices) is out to make a profit ?

Which is exactly why I advocate not using any third party. They are easy enough to set up for yourself and, if your employer made an agreement with a couple of LBS's which put £35k their way, I'm sure that you and / or your employer could get a significant discount. Just by removing cyclescheme from the equation, I was able to get 10% and that was only on the promise of a couple of bikes.

 

[DrSquirrel]

Norm, my "local" shop even says on their site they will give 10% if you don't use cyclescheme, although I think their prices are only really competative with the 10% anyway (which is easy to get, club membership is cheap etc).

I've just come out of my first year with cyclescheme...

Can't complain - I was a test case for work, then the advisory 5% was asked for last week to settle..... flipping good job....

I was glad my 12 months was at an end - I won't be entering into another... too much risk at the moment...

I use my bike a fair bit for business, so the real saving was not much over 12 months (if anything), but I was actually able to get a 'work' bike via the boss......

Can you confirm who you paid the 5% to? Because technically it should be your employer, although I have read some people saying they were invoiced by cyclescheme which is really strange imo (possibly not correct).

 

[Norm]

Some employers are selling the bikes to cyclescheme during the rental period, or using cyclescheme to buy the bikes and paying over the rental amounts. I think that's a bad thing to do but, if that has happened, it would be cyclescheme who invoiced the employee at the end of the hire period.

 

[DrSquirrel]

Ouch...

Annoyingly cyclescheme seem to be exploiting companies by hiding true facts. It shouldn't be the shop that pays to "administer" the scheme (its a commission? pah). If anything it should be the employer paying the % because they aren't willing to handle it themselves.

Now I hear employers are selling the bikes over to cyclescheme and using them to buy the bikes... isn't that more administration for your company to pay cyclescheme every month? (I assume there is some kind of credit agreement needed here, and obviously the interest on it).


I still don't see how cyclescheme can try to charge you for collection/disposal if you don't buy it back though? (fossyant - can you confirm what they were saying if you didn't pay/want it).


Nightmare :/

 

[Downward]

Ouch...

Annoyingly cyclescheme seem to be exploiting companies by hiding true facts. It shouldn't be the shop that pays to "administer" the scheme (its a commission? pah). If anything it should be the employer paying the % because they aren't willing to handle it themselves.

Now I hear employers are selling the bikes over to cyclescheme and using them to buy the bikes... isn't that more administration for your company to pay cyclescheme every month? (I assume there is some kind of credit agreement needed here, and obviously the interest on it).


I still don't see how cyclescheme can try to charge you for collection/disposal if you don't buy it back though? (fossyant - can you confirm what they were saying if you didn't pay/want it).


Nightmare :/

Cyclescheme is just a small office of a handful of Admin assistants. They have no way of collecting up bikes hence why they say you either pay X % to purchase or pay x % to dispose of. Not sure what would happen if you refuse to pay but really such a small fee to "own" your bike why would you dig your heels in ?

 

[MacB]

Cyclescheme pays the employer a one-off nominal fee to transfer the ownership of all bikes, and subsequently handles all aspects of the administration of the sale of cycles to the employees. There is no cost to the employer, but Cyclescheme retains Fair Market Values paid by the employees. After the end of each hire period Cyclescheme will contact the employee to assess the condition of the Bicycle and issue a Secondary Agreement for the appropriate value. Cyclescheme utilises the extensive knowledge and experience of its Partner Bike Shops, currently numbering over 1500 outlets across the UK, when evaluating the condition of bikes. Needless to say, it is not possible to predict the market value of a bike prior to the end of the hire period, but in our experience the bike’s value is typically a fraction of the original retail price due to the frequency of usage encountered when commuting to work throughout the year and any additional leisure usage.

This would be the potentially alarming bit - could be translated as:-

it's a lot of hassle but we'll take this off your hands and even pay a small fee - coz we're gonna milk those final valuations nice

when the, surprisingly high, final valuation arrives via Secondary Agreement we'll also offer credit terms on that - but the interest will make your eyes bleed

Final Value is typically tiny but we'll mysteriously have a massive amount of non-typical situations

 

[DrSquirrel]

Cyclescheme is just a small office of a handful of Admin assistants. They have no way of collecting up bikes hence why they say you either pay X % to purchase or pay x % to dispose of. Not sure what would happen if you refuse to pay but really such a small fee to "own" your bike why would you dig your heels in ?

Aye, it's true but it is a bully boy tactic though.

And I was just using it previously as a point as I wondered why they were asking some people to pay up or pay this when surely the company owns the bike (which has been answered now as to why).

Considering people are talking/worried about the fair market value issue, this could be more important, and makes you wonder how much your company might sell the bike to them and how much they might end up trying to charge you. I'm not sure how the valuing and cost of selling to to cyclescheme would be, but they shouldn't have to worry (in a word) about the fair market value yes?

 

[Downward]

I doubt CS will have the capacity or ability to value any of the bikes on the scheme. As discussed before they don't have the resources. I'd like to see them say "Well your bike is worth £400 so pay up" and you say "ok come and collect it, I am available from 10pm to 10.30pm"

 

[Norm]

As I said earlier, don't sell the bikes to cyclescheme. Aside from other considerations, at the end of the hire period, it is perfectly acceptable for the employer to allow the employee to continue using the bike without charge. If that happens, say over a further 24 month period, before the bike is offered for sale, the employee will then be buying a 3 year rather than 1 year old bike.

This option is not available if your employer has sold the bike to cyclescheme.

 

[Jezston]

Norm: still very confused here. From what you have said, are you saying 1. an employer can do the 'scheme' themselves and not have to involve a private third party (e.g. Cyclescheme or Evans or Halfords -assuming these are separate from each other) and 2. the employee doesn't have to actually pay the value of the bicycle back over the 12 months?

 

[Norm]

Yes and yes.

The scheme is very easy to set up and administer, I've said many times that I think it is easier to administer the policy yourself than to use a third party.

And on the second point, definitely yes. The guidelines specifically say that there is no set period, 12 months is "usual" but the scheme I set up allowed anything over 3 months. I haven't seen anything which requires the level of the repayments to be any certain level, although every scheme I have seen does set the repayments to cover the capital over the rental period, I don't think that it is a requirement of the regulations.

I believe that this is where the current schemes fall down, they maximise the tax benefit (my example only saved the employee 20% rather than the more usual 50%) but the current schemes are all set up with the expectation that the end payment would be a nominal sum.

 

[GrasB]

There is no reason to use an outside administrator. However in larger businesses/organisations with complicated internal structures it may well make more sense to use someone like cyclescheme to administer the scheme rather than keep it internal & lose a fair amount of workers time dealing with the paperwork generated internal red tape.